George Kamel - Best Investment Accounts For 2025

Episode Date: December 30, 2024

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What are the best investment accounts for 2025? Wouldn't you like to know? But seriously, I'm going to tell you today. It's not fair to toy with people's emotions like that. This video is for people who want to build wealth. So if you're not that person, keep scrolling. Okay, this is for the serious investors out there. Not for the fuddy-duddies who are just farting around,

wanted to spend money on fancy cars. I'm talking about serious wealth building. Zero's on the end. Compound growth. Ever heard of it? Get a clue. Because today we're talking about the best investment accounts for 2025. We're going to go through a lot of different investments.

accounts and there's a lot of meat on the bones. We're talking meat sweats. We're talking full-on Arbys. We have the meats and we have a lot to go around. So buckle up. We're about to get into it. And if you're a vegan, get out of here. Kick rocks and pound sand. Right? But before we get to the meat, I need you to like and subscribe. And now the moment you've all been waiting for actual content. It's about time. Now before I get to the best investment options for 2025, I need to call something out that might not be obvious if you're new to this sort of content. Here it is. Depositing money into an investment account is not the same as actually investing in good growth stock mutual funds. You see, contributing money to an investment fund is basically like dropping money into a savings account.

It just sits there until you purchase actual investments like mutual funds inside of that account. That is how you harness the power of compound growth. Now that that breaking news is out of the way, here are some of the best investment options you should consider in 2025. And we're going to break this down. It's different types of retirement accounts. So first up, let's cover employer-sponsored. retirement accounts. These are the classics, and the most popular one is the 401K. Now, even though 401Ks can hold any kind of investment, you'll most likely choose from a selection of mutual funds

through your employer-sponsored plan. And you decide how much money you want to contribute each month, up to 23,500 per year in the year of our Lord 2025. And that money will come right out of your paycheck as a dollar amount or a percentage of your salary. And bonus, lots of employers do something called a company match, which means your employer will match every dollar you contribute up to a certain percentage of your salary for free. So as an example, let's say the company matches 4%. Well, if you earn $60,000 a year and you invest 4%, that's 2400, your employer will contribute an extra $2,400 a year on your behalf.

And that is a 100% return on your money. You put in $2,400, they put in $2,400. $4,800 total. Take the match. That's amazing. Now, when you're deciding on a 401K plan, you'll likely have two options, a Roth 401k or a traditional 401K.

With a Roth 401K, the taxes are taken out up front. So you're using after-tax money, you can't get a deduction on your taxes that year, but here's the good news. Your withdrawals in retirement are tax-free, including all of the growth. Now, in a traditional 401K, your contributions are what's called tax-deferred. Pre-tax. That means you'll pay taxes every time you withdraw the money later on, including the growth and your employer contributions.

Now, four or three-bs essentially work the exact same way, except these are for people who work at nonprofits or other tax-exempt organizations like teachers, and government employees. Moving on with the employer-sponsored plan, we've got the Thrift Savings Plan, aka TSP. And this gives federal workers and military members the option to invest in tax-advant accounts. Just like a 401k or 4-3B, your TSP contributions, which can be Roth or traditional, can also be taken right out of your paycheck and put into five different fund options. That's right, you're going to have less fund options. These are broader options, and you get five to choose from. Last of the classics, we've got the old pension plan, which are also known as defined benefit plans.

pension plans are basically a guaranteed payout at retirement. Your employer uses a formula based on your salary history and length of employment, and they cut you a check as you enter your golden ears. Now, pension plans rely on the employer to save and invest the contributions for you. So, here's hoping they stay in business for a long time to guarantee your pay. These days, you don't hear much about pensions because they've been replaced by defined contribution plans like the 401K and 403B that we mentioned. And there's a reason these are going away.

They are crazy expensive to manage. And truthfully, I don't like that you don't have control over the investment. and they perform poorly. You can do better on your own with that 401K. All right, moving on from the classics, let's talk about the good old IRA. Not Ira Glass, although he's a national treasurer. I'm talking about individual retirement arrangements. And this is a retirement account that anyone with earned income can open and it's outside of your employer. And there's two types of IRAs. You probably already know, traditional IRAs and Roth IRAs. Like the traditional 401K, traditional IRAs are invested with pre-tax contributions. That means you can claim them as tax deductions

this year, but you'll pay taxes on the withdrawals later. Some other things to keep in mind, you can't touch this without penalty until age 59 and a half. But if you wait too long to start withdrawing, you'll be forced to do so at age 73 thanks to something called required minimum distributions or RMDs. But here's the good news. There's no income limit on traditional IRA contributions.

That means you can invest no matter how much money you make. Roth IRAs, on the other hand, are a little different. You're using after-tax money to invest, which means your contributions will grow, and later there will be no taxing on withdrawals because you already paid Uncle Sam. Take that. The government with pleasure.

Now, the one downside of Roth IRAs, there are income limits to contribute to a Roth IRA. But the good news is you can do something called a backdoor Roth IRA, which is a completely legal loophole to get around this. In 2025, here's the contribution limits for the IRA, $7,000 or $8,000 if you're 50 or older. This is a great option that I highly recommend, and I especially love the Roth IRA.

Next up, if you're looking for a less restrictive investment option, consider taxable investment accounts. You can open one of these through any brokerage or through your investment professional. And the big advantage with this kind of account is flexibility. Almost as flexible as your dreadlock, butchuli-scented yoga instructor, Janus. And say what you will? The guy's been undefeated and Twister since 1987. Impressive. So what makes these accounts flexible?

Well, first off, there's no income limits with taxable brokerage accounts. So if you've got a couple Benjamins lying around crisp or crumpled, I don't discriminate. You can go right ahead and open an account. And once you're investing, you can take money out of that account anytime for any reason without getting dinged by early withdrawal penalties. But the big drawback to a taxable investment account is just that. You'll pay taxes on any money your account earned. So there really are no tax advantages here. So if you're going to use one of these babies only contribute after you've maxed out those tax advantages accounts like the 401K or IRAs.

Next on the list is for my non-W2 peeps out there. If you're a contractor, freelancer, self-employed, you run a small business, there are so many retirement options for you too. The first option is my favorite. It's the solo 401k. Solo, meaning you're a one-man band or a one-woman band. In good news, your spouse qualifies to be on this plan too. Call it a duet. And as a savvy solopreneur without employees,

you can invest up to 23 grand in tax-deductible contributions. And for the cherry on top of this Sunday, you can add an extra employer match. Because get this, you're the employee and the employer, which means you can throw an extra 25% of your income into investments, just as long as the total contributions add up to less than $69,000. a year. The next option is a simple IRA. Once you hire your first employee, they've got to consider how they're going to save for retirement. And a simple IRA can be a great startup savings retirement

plan for small business owners. Employees can save up to $16,500 a year in this account. And if your employees are 50 or older, they can chuck an extra $3,500 as a catch-up contribution. And finally, for the self-employed folks, you've got the SEP IRA, and that is short for simplified employee pension. But unlike a simple IRA, only the employer can contribute to this account. How much? Well, up to 25% of the employee's salary, up to 69 grand a year. So if you're the employee, that means free money from your employer. Good news. All right, now we're going to switch gears. Here are some specialized investment options to think about in 2025. And first up, one of my personal favorites, the health savings account, aka HSA. Why do I love it so much? Well, the health savings account

has triple tax advantages. We're talking tax-free contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. And one huge tiny caveat, these are only available if you have a high deductible health plan, or as we call them in the biz, HDHPs. No, I don't have hobbies or friends. That's obvious. And one lesser huge tiny caveat, if you're relying on Medicare or someone is claiming you as a dependent, you're not eligible for an HSA.

But if you do have access to an HSA, there are some great benefits. And one, like I mentioned, it helps you pay for medical expenses tax-free. This includes medical costs you rack up now, like a prescription for a must. muscle relaxer because you're 30 and somehow tweaked your back during a particularly violent sneeze and costs that you might encounter later like when you finally convert to progressive lenses. Not that I would know. I'm not that progressive. I'm old school baby. Give me the bifocal. Hey, old man river. Zip it or I'll break your hip. The second benefit I love about HSAs, you have an option to invest what you don't spend on medical expenses. Some HSAs let you invest

your contributions into mutual funds right away. Others might require you to hit a certain threshold, like a thousand bucks, before you can use any extra to invest. And did I mention this investment option grows tax-free, like a Roth IRA. So this is a great option to consider if you're maxing out your 401K and IRA contributions and you want to invest somewhere else on top of those. And the third benefit as a little bonus, this becomes like a traditional 401k at retirement when you hit 65. You can use this money for anything, but you will have to pay taxes if it's not for medical expenses.

Extra, extra bonus for the HSA fans out there. if you pay for a medical expense out of pocket and you save your receipt, well, 20 years later, you can submit that receipt and get reimbursed from your HSA tax-free. And a triple bonus for those you that love cupcakes, if you cut a cupcake in half, put the bottom on the top, now you've got a cupcake sandwich, so you're not left with just a bunch of carbs at the bottom. That's why you watch this channel.

You come for the investment accounts, you stay for the cupcake hacks. I got to figure out how to make money on this thing. It's simply too good. And lastly, let's cover investment. for education. Kids. Whether you got them or you want them or you plan to send the ruggrats to college someday, you've got some furry babies that might want to go to a four-year university, you're going to want compound growth on your side to pay for it. And that's where 529 plans and education savings accounts, or ESAs, come into play. These are investment accounts

specifically for education that let you set aside money for qualified expenses. Think tuition, because we all know that's a racket. You got fees, you got books, you got room and board, and meal plans that include bottomless Captain Crunch in the student union. And both ESAs and 529 plans use after-tax dollars and grow tax-free, similar to the Roth 401k and Roth IRA. But ESAs have an income limit of 110 grand for a single taxpayer and 220 grand for a married couple filing jointly. There's also an annual contribution limit of 2 grand per year per kid until they're 18. And if you make too much to contribute to the ESA or you want to invest more, check out a

529 plan. There's no income limits on the 529, and the contribution limits are way higher. And this varies per state, but it could be 300,000, 400 grand, even $5.209. 500 grand depending on your state-specific 529. And if you want to learn more about 529 plans and what your options are, be sure to check out the article that I will link in the show notes and description below. Now, let me make it clear. There's a time in place to start investing for college. So before you start daydreaming of sending little Bobby off to the hallowed halls of some Ivy League institution and his monogram socks, make sure that you've already paid off your own

consumer debt, you have an emergency fund in place, and you're already investing 15% into your own retirement account. You've got to put your own mask on first, all right? Little Bobby's got plenty of time to supplement his college savings with after-school jobs, tutoring less academically promising kids on the history of the Byzantine Empire. But your retirement is a ticking time bomb, so prioritize your future first. There is a 50-50 chance that your kid goes to college and graduates. There's a hundred percent chance you will have to retire someday. And speaking of ticking time bombs, it's only a matter of time before you're caught up in an online data leak or data breach. It happens to the best of us, but our friends that Delete Me can help,

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What did you expect? Okay, now that we've talked through the investment options, you need to understand when the right time is to invest. and that is when you got rid of your consumer debt and you have a fully funded emergency fund. And how much should you invest at that point? 15% of your gross household income. And the best strategy to invest is match beats Roth beats traditional.

So first, take all the company match you can get through your employer's retirement plan if you have one. Second, do all the Roth you can at work or as an individual through a Roth IRA. And if you've exhausted the options above and you still haven't hit 15% of your income, go back to the traditional tax-deferred plan like your traditional 401k through your employer until you hit that 15%.

So here's my final takeaway. Regardless of which account you choose, the most important thing is that you actually put money away consistently over a long period of time. And here's an example of why this is important. If you invest $125 a month from age 22 to 62 with an 11% average annual return, compound growth will leave you with a million dollar nest egg at $125 a month. And 94% of that million is growth, meaning only 6% was the money that you put into it. that you contributed. So if you invest more, you'll have more. It's that simple. What an amazing concept. All right, so we've talked about a lot of investment options today, and there's still so much

more to learn. So your next step is to check out our complete guide to investing, and the good news for you, it's completely free. There's no book or course you've got to buy. All you got to do is click the link in the show notes to get Ramsey's complete guide to investing for free. Or you can go to ramsysolutions.com slash guide. So here's my final takeaway. Regardless of what account you choose and what your investing journey looks like, the important thing is you put away money consistently over a long period of time to allow compound growth to work its magic.

That's the simple secret to building wealth. And if you're not convinced that compound growth is one of the most reliable ways to build wealth, keep watching this next video where I show you exactly why your net worth explodes after your investments reach $100,000. Or click the link in the description below. Thanks for watching. We'll see you next time.